“The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed,” the airline said in a memo sent to employees. “And involuntary furloughs come as a last resort, after months of companywide cost-cutting and capital-raising.”
Under the Worker Adjustment and Retraining Notification Act, most firms with 100 or more employees must give them 60 days’ notice of mass layoffs or plant closings. What is happening at United will probably be repeated as carriers struggle to survive the worst economic crisis in the industry’s history. Airline executives have already signaled they expect to emerge from the crisis with smaller workforces.
In a message to employees in March, Oscar Munoz, then United’s chief executive, and Scott Kirby, then the airline’s president, said that while taking care of employees would be their top priority, “if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.”
Still, Wednesday’s announcement was a blow to employees.
“The United Airlines projected furlough numbers are a gut punch, but they are also the most honest assessment we’ve seen on the state of the industry,” said Sara Nelson, president of the Association of Flight Attendants-CWA, which represents nearly 50,000 flight attendants at 19 airlines, including United.
United employs roughly 95,000 people worldwide. The number of furloughs could be fewer depending on how many employees accept early retirement, voluntary separation or other programs, executives said. Already, more than 20,000 United employees have taken voluntary unpaid leaves of absence. The airline has also cut other costs, but officials said it is burning through $40 million a day.
Demand for travel has increased slowly but remains far below 2019 levels. In its June forecast, the International Air Transport Association estimated that carriers worldwide would lose $84.3 billion in 2020. Revenue is expected to fall 50 percent, from $838 billion in 2019 to $419 billion this year.
United said even though it has begun to add flights, capacity is expected to be down 75 percent in July compared with the same month last year. Some growth is anticipated in August, but the numbers are still projected to be down 65 percent compared with last August.
The recent spike in coronavirus cases in numerous states, including California, Florida, Texas and Arizona, is further diminishing hopes of a recovery, with many saying demand probably won’t return to normal levels until treatments or a vaccine become widely available. On Wednesday, the number of confirmed infections in the United States surged past 3 million, according to data tracked by The Washington Post, and there have been more than 129,00 deaths.
The AFA and other unions have called on Congress to extend payroll support offered through the Cares Act, warning that layoffs in aviation will ripple through the entire economy. U.S. airlines and cargo carriers directly employ an estimated 750,000 worldwide.
“Should October 1 arrive without extending the [Payroll Support Program] grant job program mass layoffs are inevitable, as airline executives have acknowledged. Hundreds of thousands of workers will lose their jobs and health insurance — not only in aviation, but across our entire economy,” union officials said in a letter last month to Democratic and Republican leaders on Capitol Hill. “Airline industry employment cannot simply be put back together overnight, and mass layoffs will do great damage to the sector, with potentially irrevocable consequences.”
Added Nelson on Wednesday: “Congress must extend the PSP in order to avoid hundreds of thousands of layoffs from an industry that normally drives economic activity for every other sector and supports more than 11 million jobs. Failing to maintain this successful jobs program will have a ripple effect across the economy. Conversely, a clean extension of the program helps prime us for economic recovery.”
Joe DePete, president of the Air Line Pilots Association, International — which represents more than 63,000 pilots at 34 airlines in the United States and Canada said: “The economic impact COVID-19 has had on the airline industry has been profound for the workers who keep our skies safe and our world connected. Unfortunately, in the past few weeks, thousands of pilots and crew members have received furlough notices and, absent congressional action, it is likely that there will be more to come.”
On a phone call with reporters Wednesday, United executives said they were aware of the unions’ push for an extension to the payroll support program, and while they would continue to engage with leaders in Washington, they were not counting on Congress to act.
“We don’t feel like we can count on additional government support,” a United executive on the call said.
At least one lawmaker signaled support for an extension.
“United’s announced furloughs are a canary in the coalmine for the industry,” Sen. Richard Blumenthal (D-Conn.) said in a statement. “It’s clear that an extension of the Payroll Support Program is necessary to help airline workers keep their jobs and health insurance in the months ahead. I will continue to push for additional aid that puts workers and consumers first — and keeps airlines accountable.”
Of the 36,000 United employees who could be affected, roughly 15,000 are flight attendants, and 11,000 are customer service or gate agents. About 1,800 catering workers, 1,000 contact center employees, 5,500 technical operations employees and 225 network operations workers also could be affected. Among pilots, 2,250 could be harmed.
“Furloughing employees is corporate triage with a terrible impact on thousands of United families,” said Todd Insler, chairman of the United Master Executive Council of the ALPA. “This is a direct result of the global pandemic which has affected millions around the world and nearly grounded our industry. ALPA is doing everything we can do to support our fellow pilots, and we expect to have final agreement on several voluntary programs which will mitigate these furloughs.”